Kheops Focused on Building Lasting Partnerships with Mills, Pallet PlantsQuebec-based Kheops has been built on developing a unique partnership

By Jack PetreeDate Posted: 12/2/2003

If you discuss lumber with Julien Prince of the Kheops Group for very long, the word ‘partnership’ will come into the conversation. His company, Quebec-based Kheops, has been built on developing a unique partnership between Kheops, its pallet manufacturing customers, and the sawmills serving them.

The partnership is transparent, according to Julien, with sawmill, middleman, and manufacturer linked in a common, combined effort. They team to produce pallet components and lumber to the highest standards and also maximum profitability. "This approach allows for a realistic application of long-lasting business solutions for each partner," he said.

Kheops was founded in 1988 to provide mill-direct sources of lumber to industrial users in the pallet industry. From the very beginning, Kheops has concentrated on the needs of the pallet industry. With Kheops, pallet lumber is not a secondary product or focus, as it sometimes is in the sawmill industry. Supplying pallet material is the central thrust of the business – as it has been from day one.

Kheops expanded in the mid-1990s, establishing a hardwood lumber division that makes grade lumber for the flooring industry and furniture manufacturers, among other products. The company expanded further in the late 1990s with the addition of a softwood division to produce mostly commodity lumber for lumber and hardwood retailers as well as manufacturing plants, builders, and other markets.

As Kheops grew, the new divisions were supported by their own dedicated resources instead of being integrated. That way the business could focus on the individual needs of the markets served by the different divisions. Each group is part of the same overall business yet is operated to a large degree as an independent company, which enables Kheops to offer a wide diversity of products.

The independent structure and approach is in accord with Kheops’ mission statement. "Each member of our organization works specifically to identify and then satisfy the particular need of each customer and each supplier in developing long-lasting solutions enhancing the marketing, production, quality control efforts, and manufacturing processes of each," said Julien. Kheops is organized in such a way to create an efficient production chain connecting lumber manufacturer to distributor and market, and each link in the chain contributes to the strength of the whole.

The production chain ultimately ends with a pallet going out the door of a manufacturing plant and on its way to a customer. It begins, of course, at the sawmill.

Kheops represents sawmills that dedicate all or much of their production to serving Kheops’ customers. "We deal with about 35 mills at the present time," Julien said. "We have a day-to-day relationship with about 20 of them. Each mill has agreed to work to provide for the specific needs of our manufacturing customers."

The sawmills cut aspen and a variety of other hardwoods native to the forests of Eastern Canada. About 70% of the Kheops product line is Canadian aspen with the remaining 30% consisting of other high density hardwoods, primarily maple and birch.

Last year, the Kheops pallet division posted just under $30 million in sales. Markets served by the company include Eastern Canada and, in the U.S., the Northeast, South and Mid-West as far as Nebraska. The company’s pallet lumber products include components specially produced for rental and white pallets -- deck boards of ½-inch, 9/16-inch, 5/8-inch, ¾-inch and 7/8-inch, standard or chamfered, and 1 1/8-inch, 1 ¼-inch, 1 3/8-inch, 1 7/8-inch, and 2 7/8-inch notched or plain stringers. The sawmills also produce hardwood cants and repair material.

The sawmills do much more than produce lumber and deliver it to Kheops’ accumulation yards. The four traders making up the Kheops pallet team interact almost daily with each mill to improve service to pallet manufacturers.

"Every mill we deal with is personally visited at least once every three weeks," Julian explained. "We have a quality control person who is on the road full time, visiting mills and working with them to improve their production. Every trader is also required to visit mills on a regular basis. We cannot do our job to our best ability if we do not have a hands-on relationship with the sawmills."

The sawmills are expected to be willing to make extraordinary efforts to ensure their production is oriented to the specific needs of the customer. In return, Kheops provides steady business for the mills as well as prompt and reliable payment.

"Our attractive price structure and efficient payment system ensures sawmill owners the best return for their lumber," said Julien. "They are able to bank on the growth potential, profitability, and stability that working with Kheops brings. In return, they work as hard as we do to make sure customer needs are fully met."

Customers are considered part of the partnership with the Kheops team, too. Modern pallet manufacturing businesses require professional services too, observed Julien. They require consistent quality in pallet lumber, a dependable supply, and often ‘just-in-time’ delivery service in order to be fully profitable.

Pallet manufacturers cannot afford downtime due to lumber shortages, so Kheops works with mills to schedule deliveries for a steady, on-going supply of material. Most pallet manufacturers supplied by Kheops are on a program with delivery schedules set up in advance.

“For us, the long-lasting business is important," said Julien. "When we begin with a customer, we sit down with them and develop a program directed towards servicing their needs fully. When we start a program with a customer, they should be assured they will receive the material they need, that it will be a quality product produced to their specific needs, and that if something happens to a particular mill to interrupt the flow, we will protect the customer by shifting production if necessary. Stability is very important to a manufacturer, and that is one of the most important ‘value-added' services we provide. They're going to get what they ordered."

"Every year I do a customer trip, taking suppliers along to visit pallet plants,” said Julien. “Of course, we cannot visit every customer, but we take the sawmill owner into a representative selection of pallet plants so they can see where the lumber they produce is going and what the special needs of the customer are. We do the same the opposite way, bringing customers to visit sawmills."

In addition to the trips matching customer and supplier, Kheops traders are expected to visit customers regularly. The members of the sales team are expected to get out of the office and visit customers to make sure they are getting what they need.

"We want our customers to be able to depend on us for the latest advances in the industry,” said Julien. “We want regular customer contact. If something is not working just right, we want to know about it so we can work on a solution. If the pallet manufacturer is adjusting his processes and needs to change the product mix they purchase from us, we want to be involved so we can help by designing a seamless flow of material from the sawmill.”

The mill tours are important, Julien pointed out, because they demonstrate the Kheops commitment to provide exactly the material needed to manufacture to the highest standards. The tours also are a real opportunity for sawmill owners to see first-hand why certain things are asked of them.

"We do a lot of consulting for the sawmills to help them improve their processes," Julien said. "The plant tours are a good opportunity for them to learn more as customers can say, ‘Look what happens when this occurs,’ or, ‘Here's what improves our ability to make a good pallet.’ "

As the third member of the three-way partnership, Kheops has a very active role in communicating with the sawmills and Kheops’ customers and coordinating the process of supplying lumber to the pallet companies. Besides the regular on-going contact and consulting with sawmills by the Kheops traders, the Kheops staff works daily to solidify supply and distribution channels; they seek to continually improve an approach the company already feels is the best available the customer.

The Kheops pallet division goes to considerable lengths to secure availability of quality lumber delivered on time to its customers. For example, Julien is developing sources of supply in South America. His efforts will ensure that steady supplies of lumber will be available at times of the year when the Northern forests are difficult to harvest.

"Not only will a South American presence give us a better ability to assure a good product year-round," he said, “it will allow us to expand our markets to portions of the South that is difficult to serve at the present time."

The Kheops approach has proven very successful because it is built on the idea of partnership between the sawmill, the middleman, and the user. “It should surprise no one that sawmills choose Kheops to represent them,” said Julien. The stability and knowledge that Kheops is able to provide gives the mills the best return on production while pallet manufacturers are supplied with a top quality product at a price that allows them to be competitive.

"The transparency of our system also gives the pallet manufacturer direct feedback to the sawmill supplying them with the product," said Julien. "That's a very important factor in optimizing production."

At Kheops, a staff with decades of experience working with sawmills and pallet manufacturers makes for a smooth flow of information between all parties. "The stability and knowledge we bring to the supplier and the user is a true added value,” said Julien. “It enhances everyone's ability to manage their business profitably. Our customer's success is our success."

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